SoundExchange offers to delay rate hikes for small webcasters

By K.C. Jones, InformationWeek

SoundExchange has offered to extend 1998 royalty rates for small commercial Internet radio companies, just days before higher rates were scheduled to take effect.

The group announced the move Thursday, after promising during Congressional hearings that it would postpone rate hikes, at least temporarily. The promise came after the U.S. Court of Appeals for the District of Columbia denied motions to force a postponement.

"While this decision fully validates the rates set by the [Copyright Royalty Judges], SoundExchange is mindful of the need to nurture the growth of the Internet radio industry," the industry group said in a statement. "That is why SoundExchange has offered to extend 1998-era below market rates to small commercial Webcasters, and to keep rates at 2003 levels for thousands of non-commercial Webcasters. This would mean that the vast majority of Internet services would have no rate increase of any kind from 1998-2010. Additionally, SoundExchange is in active negotiations with the Digital Media Association and others with respect to a cap on minimum fees."

The court decided not to throw out previous rulings by Copyright Royalty Judges regarding fee increases for recording artists and record labels, while a general appeal of the rate hikes continues winding its way through the judicial process. The judges had deliberated for more 18 months on whether rate hikes set by a federal copyright board were fair.

"We are pleased by this decision, which vividly demonstrates that the Copyright Royalty Judges got it right when they set royalty rates and terms for the use of music on Internet radio," John Simson, executive director of SoundExchange, said in a statement. "This is a major victory for recording artists and record labels whose hard work and creativity provides the music around which the Internet radio business is built. Notwithstanding this victory, we continue to reach out to the Webcasting community to reach business solutions. We look forward to working with our partners, the Webcasters, to grow opportunities across the board for Internet radio operators and recording artists."

Michael Huppe, general counsel for SoundExchange, said that he thinks this week's ruling indicates that the rate hikes are fair. "The court's decision is a reminder of the extremely thorough and thoughtful process by which the new royalty rates were set," he said.

Representatives for DiMA did not immediately return calls for comments Friday.

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